Academic journal article South Asian Journal of Management

An Empirical Study on the Impact of Supplier Performance on Organizational Performance: A Supply Chain Perspective

Academic journal article South Asian Journal of Management

An Empirical Study on the Impact of Supplier Performance on Organizational Performance: A Supply Chain Perspective

Article excerpt

Supply chain management is the latest phenomenon in the present business world. Efforts are being made to integrate the various players into one performing unit. Suppliers and customers are being brought into planning and problem-solving activities of the firm. It is fast becoming imperative that all members of a supply chain should perform if they are to survive. This research paper is one of the first attempt of its kind to study the supply chain practices of small manufacturing firms. The objective is to find out the impact of supplier performance on the performance of the firms. The sample frame is small scale manufacturers (firms with less than 100 employees) listed with Coimbatore District Small Industries Association (CODISSIA) . A simple random sample of 75 firms is selected from the source list of 792 firms. These firms were administered a structured questionnaire containing pre-validated scales to measure the supplier performance and organizational performance of firms. After the data were collected, the scales were purified using Corrected Item Total Correlation (CITC) values and reliability was tested using Cronbach's alpha. The resultant purified scales were then tested for convergent validity using PLS path modeling software (Visual PLS). Once the constructs were found to be both reliable and valid, the impact of supplier performance on organizational performance was tested using bootstrapping method. The supplier performance was found to have a significant impact on the performance of the firm.

INTRODUCTION

Supply chain initiatives ovet the last decade, while frustrating at times, nave proved enormously beneficial to businesses; the most successful innovators viewed supply chain as a strategic tool changing the rules of the game (Anderson and Narus, 1990). As a result, supply chain management and shareholder value are closely linked, and supply chain management continues to play a maiot role in corporate success,

Barratt (2004) defines supply chain as network of facilities and distribution options that performs functions like procurement of materials, transformation of these materials into intermediate and finished products, and distribution of these finished products to customers. Balsmeier and Voisin (1996) state that supply chains exist in both service and manufacturing organizations, although the complexity of the chain may vary greatly from industry to industry, and from firm to firm.

In the 1990s, business leaders were inundated with new supply chain initiatives - from just-in-time inventory management to collaborative product commerce (Anderson and Narus, 1990). Most of these programs were wellconceived, but their complexity and misalignment with corporate operating models often produced conflicts, delays, and suboptimal results. At other times, competing or overlapping agendas led to inflated budgets and project terminations, leaving executives exhausted and discouraged.

During the same decade, however, supply chain programs saved thousands of companies' billions of dollars. Successful initiatives have made it possible for companies to meet customer needs more quickly, less expensively, and through more channels, providing better-quality, more reliable goods that reach the market sooner. And for the first time, masscustomized products and services became a reality (Anderson and Narus, 1990).

Davis (1993) explains that in today's ultra competitive world of short product life cycles, complex corporate joint ventures, and stiffening requirements of customers, it becomes necessary to consider the complete scope of supply chain management in the manufacturing sector. He further adds that successful businesses will need better visibility into their supply chains; they must better be at collaborating with suppliers to meet customer demands. Suppliers will be asked to react quickly to changes in the business environment and perform at levels higher than ever before. …

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